If you find it difficult to manage quarterly payments to HMRC to settle your VAT, why not consider the VAT Annual Accounting Scheme (AAS)?
Under the AAS you:
- make nine payments on account towards your annual VAT bill – based on your last returns (or estimated if you’re new to VAT); and
- submit one VAT Return a year.
When you submit your VAT Return you either:
- make a final payment – the difference between your advance payments and actual VAT bill; or
- apply for a refund – if you’ve overpaid your VAT bill.
The AAS wouldn’t suit your business if you regularly reclaim VAT because you’ll only be able to get one refund a year (when you submit the VAT Return). Also, you can only join the AAS if your estimated VAT taxable turnover is £1.35 million or less.
However, smoothing the cash flow impact of VAT payments can be helpful as is submitting one VAT Return a year instead of four returns.
The Annual Return, and any balancing payment, needs to be submitted within two months of the annual year end date for VAT purposes.
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You can’t use the AAS if:
- you left the scheme in the last 12 months;
- your business is part of a VAT registered division or group of companies;
- you are not up to date with your VAT returns or payments; or
- you are insolvent.
You must leave the AAS if:
- you’re no longer eligible to be in it; or
- your VAT taxable turnover is (or is likely to be) more than £1.6 million at the end of the annual accounting year.
For further information on this topic contact Michael O’Brien here.